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Sustainable business

Sustainability

Being less bad is simply not good enough anymore

Published 14 July 2022 in Sustainability • 8 min read

Why Paul Polman believes that companies whose leaders bring humanity back into business will help us all achieve net zero.

 

For many people, Paul Polman needs little introduction. The 65-year-old Dutchman has been one of the world’s leading voices arguing for sustainable business, a cause he championed in his decade running consumer goods company Unilever.

There, he demonstrated that a long-term, multi-stakeholder model is not incompatible with superior financial performance. Polman was also a member of the UN Secretary General’s High-Level Panel that developed the Sustainable Development Goals and which he continues to champion.

Yet at a recent World Economic Forum he was persuaded by the editor of the Harvard Business Review to turn his experience at Unilever into a book, to “get more people exposed to the story of what you started to do there”, as he remembers the editor telling him.

Thus was born “Net Positive: How Courageous Companies Thrive by Giving More Than They Take”, published last year and co-authored by sustainability consultant Andrew Winston. The book takes companies to task for failing to take adequate steps truly to pursue a net zero agenda, and also calls out the phenomenon of companies making claims to be climate-friendly but then hiding behind the trade associations of which they are members and which lobby for the status quo.

Ultimately, Polman and Winston argue, companies must take responsibility for their place in the world and, as a headline in a recent Financial Times interview with Polman put it, “put grandchildren ahead of greed”.

In a conversation with the IMD Alumni Club UK, Polman laid out in cautious terms where we are post-COP26, the global climate summit in Glasgow last November, and what net zero should really mean for businesses.

What he saw coming out of COP26 were plenty of well-intentioned statements in sustainability reports by companies committing to fewer emissions, policies leading to less plastic heading to the oceans, a reduction in deforestation, and so forth.

Yet in a world that has overshot its planetary boundaries, Polman said, such commitments to be “less bad” are simply not good enough. As he put it: “I used to murder 10 people. Now I murder only five. I’m not a ‘better murderer’ as a result.” 

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So, what should a net zero approach mean, given this context? “The only thing that really works longer term is if we think restorative, ‘repair-ative’, and that is what we call net positive. We ask ourselves a very simple question in the book: how can I profit from solving the world’s problems, not creating the world’s problems, and is the world better off because my company is in it — yes or no?”

Polman believes that very few companies can answer that question in the affirmative — not even Unilever — and he acknowledged that this is difficult.

“For us, a net positive company is a company that, first and foremost, takes responsibility for its total impact in the world – all consequences, intended or not. Many of them think that they can outsource their value chain and also outsource their responsibilities; that doesn’t work anymore.

“A net positive company operates long term by addressing these major issues and works ‘multi-stakeholder’ puts sustainability at the core. They see the shareholder return as a result of what you, and not as a myopic objective. And, last but not least, these companies work on the broader transformations that society needs.

“These issues are simply too big for anybody to do alone. And they cannot really happen at the scale and speed that we needed if we don’t get the right frameworks in place. So, this is what net positive companies do. And increasingly we are starting to see signs of that happening. But we obviously need to scale it.”

With leadership key to being able to achieve net zero objectives, it’s important to consider what kind of leadership is required. Polman’s answer: “courageous leadership”.

To explain this, he referred back to the height of the Covid-19 pandemic, a period that tested leaders in many ways. Polman observed that there were two “bifurcations” evident at the time.

The first was between two types of company. Those operating under what he called “multi-stakeholder, longer term models”, with purpose at their core and embedding sustainability in all of their operations, did better. That was reflected in the relative outperformance of environmental, social and governance (ESG) funds, Polman said.

By contrast, companies that were just focused on the shareholder, had become over- leveraged, had not invested in the resilience of their value chain or in their own employees, had a harder time getting through the crisis.

The second bifurcation was related to leadership itself. “Where organizations that were run by leaders who showed a higher level of empathy, compassion and humility [and were] purpose-driven and thinking on multi-generational terms — they instilled a higher level of trust at a very uncertain time when many people had an enormous level of angst,” Polman explained. “And those companies and those leaders tended to do better. They created a following that ultimately gets translated into results.”

In the book, Polman and Winston say that such companies give more than they take and are run by people who lead “with the heart and the brain”. Such courageous leaders are in essence “bringing humanity back to business”. They have a high level of awareness of what is going on in the world and a high appetite to engage.

“As a result of that higher level of awareness and purpose, they’re not afraid of setting the targets that are needed, not the targets that they can get away with,” Polman explained. “They’re not afraid to work in partnership and listen to sometimes inconvenient truths. And they’re not afraid to work with broader changes that society needs, even if it requires working with governments and others, which at times is not that easy.

“You cannot have a sustainable company if you’re not sustainable yourself, or a purposeful company if you’re not purposeful yourself. You cannot be a courageous company, if you don’t have that courageous leadership,” he said.

“Organizations that were run by leaders who showed a higher level of empathy, compassion and humility [and were] purpose-driven and thinking on multi-generational terms — they instilled a higher level of trust at a very uncertain time when many people had an enormous level of angst”
- Paul Polman

During the IMD Alumni UK session, Polman was asked what “tipping points” were achievable in the push towards net zero.

On global warming, he said the window allowing the world to remain below 1.5 degrees Celsius remained open, but only just. “I’d say the patient has entered the emergency operating room, but there is still a possibility that we can keep the patient alive.”

He cited three reasons for being optimistic or, as he puts it, “a prisoner of hope”, citing a phrase he recalls late Archbishop Desmond Tutu of South Africa once using. The first was technology, and how fast it is moving in areas including solar, wind and regenerative agriculture, where we were “close to tipping points”.

The second was what emerged from the COVID-19 pandemic, which showed that the cost of not acting is becoming higher than the cost of acting. “We spent $17 trillion to save lives and livelihoods in Europe and the US alone and while we are not out of the woods yet, it cost us infinitely more than it would [have] cost us to solve these issues in the first place, in this case, the zoonotic diseases that emerged thanks to the erosion of our biodiversity.”

The last reason for Polman’s optimism is demographics. Half of the world’s population is under 30 years old. Young people, he said, are purpose-driven and tech-savvy. “So, I think it’s time to give them a seat at the table or in some cases give them the table,” Polman said.

Ultimately, however, Polman felt that it all came down to leadership. “I would argue that the biggest thing that we have to deal with is not actually the absence of technology or the knowledge of what needs to be done. Most of that is within our reach. What we are dealing with is a lack of leadership or a lack of willpower. This ultimately is not a crisis of climate change or inequality or food security. These are symptoms. This is a crisis of greed, of empathy, of selfishness. And unfortunately, in our management education, in our incentive systems, we have created the wrong leaders and the wrong behaviors.

“We need to create the right leaders for today’s and tomorrow’s requirements — to ensure we create the right leaders as ‘systems change’ in itself,” Polman concluded. “If we continue to measure success only as a return on financial capital, then we’re going to behave a certain way. But if we also measure human social, environmental capital, we’re going to behave a different way. So, we need to broaden the definition of success— and measure it differently.”

Authors

Knut Hanaaes - IMD Professor

Knut Haanaes

Lundin Chair Professor of Sustainability at IMD

Knut Haanaes is a former Dean of the Global Leadership Institute at the World Economic Forum. At IMD he teaches in many of the key programs including the MBA, EMBA, and other executive programs. He is Program Co-Director of the new Leading Sustainable Business Transformation program and the Driving Sustainability from the Boardroom program. His research interests are related to strategy, digital transformation, and sustainability.

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